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Editorial: Payment from Citigroup a win for Justice, people

Eric Holder, Tony West, John Walsh

Attorney General Eric Holder, center, with Tony West, Justice Department's lead negotiator, left, and Colorado US Attorney John Walsh, right, announces at the Justice Department in Washington Monday, July 14, 2014, that Citigroup will pay $7 billion to settle an investigation into risky subprime mortgages, the type that helped fuel the financial crisis. The agreement comes weeks after talks between the sides broke down, prompting the government to warn that it would sue the New York investment bank. The bank had offered to pay less then $4 billion, a sum substantially less that what the Justice Department was asking for. The settlement stems from the sale of securities made up of subprime mortgages, which fueled both the housing boon and bust that triggered the Great Recession at the end of 2007. (AP Photo/Pablo Martinez Monsivais)

We can only hope that it serves as a warning to others who consider playing fast and loose with the rules in the future.

A house built on a weak foundation will not stand. For as long as folks have been building houses, this has been an indisputable, rock-solid fact.

And what of a housing market based on little more than lies?

Its long-term viability would also be perilous. Anyone would know that, right?

Well, yes, sort of. Except that back in the go-go days of always-rising housing prices, there were so many who'd found ways to profit from the market in faux mortgages that no one wanted to see the party come to an end.

When it was announced on Monday that Citigroup would pay $7 billion to settle claims that it willfully sold mortgage-backed securities that it knew well were virtually worthless, it constituted a real win for the Justice Department and Attorney General Eric Holder. Earlier this year, Citigroup had hoped to get those pesky feds off its trail by offering a cash payment of a mere $363 million.

By any measure, securing more than 19 times that amount – without closing the door on further actions against Citigroup – was a win for the Justice Department and the people.

We can only hope that it serves as a warning to others who consider playing fast and loose with the rules in the future.

It's important to remember that the Great Recession didn't just happen. The housing market didn't collapse because of some sad confluence of unfortunate circumstances. It was a manufactured disaster that was made inevitable by people's direct actions.

A Citigroup trader who warned that the financial giant was touting shabby mortgages as the real thing put his concerns in writing in an internal e-mail. His suggestion: "We should start praying."

Trouble was, when it all fell to pieces, as any house of cards eventually will, it was the overall economy and the well-being of normal folks across the globe who didn't have a prayer.

All these years later, the economy is only just now getting back up to speed. We'd hope that Holder continues to look for ways to see that those who were responsible pay for what they did.